Paying for waiting - compensating for on-call time

HR Magazine, August, 1999 by Carolyn Hirschman

How and when to pay for on-call time depends on business needs, employee relations and legal considerations.

A computer system crashes. A nurse calls in sick. A thunderstorm downs a power line. Employees on standby respond to these and other emergencies around the clock. How they're compensated for this on-call time varies widely - from nothing at all to extra pay and time off.

"No two [policies] are alike, and they're not alike in an industry. There's nothing consistent," says N. Elizabeth Fried, president of N.E. Fried & Associates, a Dublin, Ohio-based HR consulting firm that each year surveys firms nationwide about their on-call systems.

In addition, technology has changed the nature of being on call - that is, working off a regular job shift and premises but remaining available to respond via telephone or computer and to report to work if necessary.

Once upon a time, workers sat at home and waited for the phone to ring. These days, pagers, cellular phones and laptops leave them free to go shopping, attend a child's soccer game and pursue other personal activities. "It's made application of the law that much more difficult," says Liz Snyder, a legal consultant at Hewitt Associates, a benefits consulting firm based in Lincolnshire, Ill. The law, the Fair Labor Standards Act of 1938 (FLSA), is "pretty gray" to begin with when it comes to on-call pay, she adds.

Restricted Activities Key to Pay

The law is clearest for nonexempt employees who are subject to the law's wage and hour provisions. Hourly workers who must remain on their employer's premises or so close that use of their personal time is severely restricted must be paid for being on call, according to a Department of Labor (DOL) fact sheet. But those who merely must be reachable, by phone or pager, aren't working and don't have to be paid - in most cases.

"The bottom line is whether [wearing] the beeper prevents an employee from using his or her time for their own personal purposes," says Snyder. If workers can use their on-call time primarily for personal activities, they don't have to be paid. Factors to consider include required proximity to the workplace, the time required to respond to pages and the duration of the on-call period.

For example, a hospital nurse wearing a beeper for the weekend who can go out to dinner, sleep and otherwise carry on a normal home life doesn't have to be paid. But a computer technician who must respond to frequent pages or travel at a moment's notice must be paid. It's the difference between "waiting to be engaged" and being "engaged to wait," in DOL lingo.

If hourly employees are called in to work - as opposed to just wearing a pager - they must be paid for a minimum number of hours, usually two hours, regardless of the time actually worked, says Gary B. Omura of Omura Consulting Group, an HR consulting firm in Santa Clara, Calif. Any time over 40 hours per week must be paid at time-and-a-half as required by the FLSA.

"We urge [employers] to get a [DOLl opinion letter if they have an ongoing problem," says Deborah Keary, SPHR, director of the Society for Human Resource Management's Information Center in Alexandria, Va. Although these legal opinions pertain only to specific cases, they often are used as guidelines by employers in similar situations, she says.

Info Tech on Call

Exempt employees aren't legally entitled to on-call pay. In practice, they often but not always get "beeper pay" or some other perk to compensate them for their inconvenience, added responsibility and possible extra work. But such compensation can throw employers into murky legal waters (see box, below).

One trend is clear, though: On-call pay is becoming increasingly common, at least for exempt employees, according to Fried's latest report, based on surveys conducted in late 1997 and early '98. With low unemployment and good workers hard to find, companies are paying beeper pay "to keep people happy," she says.

Of 97 on-call plans surveyed, 56 paid nonexempt workers and 41 paid exempt workers for being on call but not reporting to work. In addition, 32 plans compensated exempt employees, often on an hour-by-hour basis, who were called in to work or who responded by phone or computer, the survey shows.

Clearly, the issue of on-call pay is coming to the fore, especially for HR in the fast-growing, labor-short high-tech industry. A survey by Hewitt Associates and MCI Communications Corp. [now MCI WorldCom Inc.] showed that 41 percent of information-technology employers paid on-call employees in some way.

Take the Taylor Group, a software developer and reseller in Bedford, N.H. "One of our goals is employee satisfaction. We think customer satisfaction comes from employee satisfaction," says Human Resources Manager Laurie J. Murphy.

"We also believe in maintaining work-life balance. If we required people to wear a beeper without compensation, it'd be contradictory." In May, the Taylor Group began a flat-rate pay scheme for the five of its 110 employees who are on call to answer client questions and to respond when servers or other computer equipment fail. Two people are on call at any given time. Workers who are on call weekday evenings (7 p.m. to 7 a.m.) receive $100 per week; around-the-clock weekend duty draws $70; and 24/7 for one week earns $170.